Tax Reporting of Fund Managers' Profit Grants: New Carried Interest Rules for Partnerships and S Corps

Determining Applicable Partnership Interests, Eligible Services, and the Three-Year Holding Period

Recording of a 110-minute CPE webinar with Q&A

Conducted on Wednesday, August 15, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers and compliance professionals with a practical guide to the compliance challenges and planning opportunities found in the carried interest provisions in the new tax reform law. The panel will discuss the default treatment of a partnership grant of a profits interest where the recipient has no capital contribution obligation, and detail the specific changes to the treatment of carried interest in the TCJA.


The new tax reform law retained the practice of preferential tax treatment of profits interest or “carried interest” paid to managers of hedge funds, private equity, and real estate funds. However, tax reform contained several significant changes to carried interest taxation which may present potential tax reporting and planning challenges to partnership tax advisers and compliance professionals.

Carried interest refers to the practice in which certain partnerships grant profits to general partners serving as fund managers for their active management services in cases where the fund’s profit margin exceeds a specified rate of return applicable to limited partners. Current law allows the general partner recipient to treat this payment as long-term capital gain if the underlying assets meet the required holding period. The grant itself is not subject to tax upon either grant or vesting.

The recent tax law did not eliminate the carried interest preference but made several fundamental changes. Tax reform introduced the concept of “applicable partnership interest” to define and limit those partner activities and partnership structures eligible for profits interest treatment. The act also extended the holding period available for preferential treatment from one year to three years. Tax advisers must recognize the challenges and opportunities the changes to profits interest treatment can present to eligible partnerships.

Listen as our experienced panel provides practical guidance on the tax reporting and planning challenges contained in the new carried interest rules.



  1. Structure of carried/profits interest
  2. Changes to carried interest treatment in tax reform law
    1. Applicable partnership interest
    2. Extended holding period
    3. Specified assets covered by extended holding period
    4. S corporations not eligible for preference
  3. Pending and anticipated regulatory guidance
  4. Tax reporting challenges involving carried interests
  5. Differences between federal and state treatment of carried interests


The panel will discuss these and other important topics:

  • How might the new “applicable partnership interest” provisions in the new tax law change the structure and tax reporting of profits interests to fund managers?
  • Impact of the Section 1061 holding period increase on the tax treatment of profits interest for assets with a holding period between one and three years
  • Potential reporting differences between state and federal tax treatment of carried interest income


Velotta, Rob
Rob Velotta, CPA, MT

Partner, Tax
Cohen & Company

Mr. Velotta is leader of the firm’s RICs, REITS and financial instruments tax team. He assists clients with RIC...  |  Read More

Yahara, William
William Yahara, CPA

Director, Tax
Cohen & Company

Mr. Yahara's 15 years of experience dedicated to the alternative investment industry allows him to offer highly...  |  Read More

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